Chap2Prac - Homework Manager - Corporate Finance FIN301-004

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Question 1: Score 1/1 Your response Correct response Building a Balance Sheet Romo, Inc., has current assets of $2,900, net fixed assets of $21,100, current liabilities of $2,400, and long-term debt of $11,000. (Omit the "$" sign in your response.) The value of the shareholders' equity account for this firm is $ 10600 (50%). The amount of net working capital is $ 500 (50%). Building a Balance Sheet Romo, Inc., has current assets of $2,900, net fixed assets of $21,100, current liabilities of $2,400, and lo debt of $11,000. (Omit the "$" sign in your response.) The value of the shareholders' equity account for this firm is $ 10600 . The amount of net working capital is $ 500 . Feedback: The balance sheet for the company will look like this: Balance Sheet Current assets $ 2,900 Current liablities $ 2,400 Net fixed assets 21,100 Long-term debt 11,000 Owners' equity 10,600 Total assets $24,000 Total liablities & Equity The owners' equity is a plug variable. We know that total assets must equal total liabilities & owners' equity. Total liabilities and equity is the sum of all debt and equity, so if we subtract debt from total liabilities and owners' equity, the remainder must be the equity balance, so: Owners' equity = Total liabilities & equity – Current liabilities – Long-term debt Owners' equity = $24,000 – 2,400 – 11,000 Owners' equity = $10,600 Net working capital is current assets minus current liabilities, so: NWC = Current assets – Current liabilities NWC = $2,900 – 2,400 NWC = $500 Question 2: Score 1/1 Your response Correct response Building an Income Statement Fyre, Inc., has sales of $576,000, costs of $270,000, depreciation expense of $75,000, interest expense of $49,000, and a tax rate of 32 percent. The net income for this firm is $ 123760 (100%). (Omit the "$" sign in your response.) Building an Income Statement Fyre, Inc., has sales of $576,000, costs of $270,000, depreciation expense of $75,000, interest expense and a tax rate of 32 percent. The net income for this firm is $ 123760 . (Omit the "$" sign in your resp Feedback: The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income. Doing so, we get: Income Statement Sales $ 576,000 Costs 270,000 Depreciation 75,000 EBIT $ 231,000 Interest 49,000 Taxable income $ 182,000 Taxes 58,240 Net income $123,760 Question 3: Score 1/1 Your response Correct response Dividends and Retained Earnings Fyre, Inc., has sales of $591,000, costs of $275,000, depreciation expense of $72,000, interest expense of $44,000, and a tax rate of 32 percent. (Omit the "$" sign in your response.) If the firm paid out $65,000 in cash dividends, the addition to retained earnings is $ 71000 (100%). Dividends and Retained Earnings Fyre, Inc., has sales of $591,000, costs of $275,000, depreciation expense of $72,000, interest expense and a tax rate of 32 percent. (Omit the "$" sign in your response.) If the firm paid out $65,000 in cash dividends, the addition to retained earnings is $ 71000 . Feedback: The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income. Doing so, we get: Income Statement Sales $ 591,000 Costs 275,000 Depreciation 72,000 EBIT $ 244,000 Interest 44,000 Taxable income $ 200,000 Taxes 64,000 Net income $136,000
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/10/2010 for the course FIN 301 taught by Professor Andelin,stevenle during the Spring '07 term at Pennsylvania State University, University Park.

Page1 / 5

Chap2Prac - Homework Manager - Corporate Finance FIN301-004

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online